HMM returns to Asia-Europe with panamax vessels

Hyundai Merchant Marine (HMM) is to launch a standalone Asia-North Europe service in April that promises industry-leading transit times between Busan and Rotterdam.

Branded ‘Asia-Europe Express’ (AEX), the new service will turn in ten weeks with ten classic panamax ships of 4,700 teu, according to Alphaliner, calling at Busan, Shanghai, Ningbo, Kaohsiung, Yantian, Singapore, Colombo, Rotterdam, Hamburg, Felixstowe, Singapore, Hong Kong and Busan. The first sailing is planned for 7 April from Busan.

The ‘AEX’ will add to the six Asia-North Europe loops that HMM offers through slots on 2M services operated by Maersk Line and MSC within a broad 2M+HMM arrangement that was implemented in April 2017, Alphaliner points out. “The ‘AEX’ launch will mark HMM’s return to the Far East-Europe route as a vessel operator, exactly one year after the carrier withdrew its ships from the trade. Last year’s withdrawal came in the wake of the 2M+HMM agreement’s launch,” it added.

Alphaliner observed that the ‘AEX’ will be the smallest loop on the Far East-North Europe direct trade and, together with the ‘SEANE’ service of CMA CGM, will bring more classic panamax tonnage back onto the route. Such ships were eliminated from the Far East-North Europe trade three years ago and Alphaliner’s records show that the last classic panamaxes phased out in January 2015, the analyst said. CMA CGM then brought such ships back in July 2017, when it launched the ‘SEANE’.

Apart from the AEX and SEANE, the smallest services on the Asia Europe mainline are currently the THE Alliance loops 'FE1' and 'FE5', both operated with ships of 8,500-10,000 teu, Alphaliner said. The 15 remaining Far East-North Europe loops are all operated with ships of 14,000-22,000 teu.

Since 2008, the average size of vessels deployed on this route has steadily risen from 7,200 teu to over 15,000 teu, Alphaliner noted, adding: “The relatively small size of the vessels used on the ‘AEX’ should put HMM at a significant cost disadvantage against its rivals, but for Korean carrier the new service launch is also a prelude for a more substantial return to the Far East-Europe route at a later stage.

“HMM plans to order a series of 23,000 teu ships for delivery in 2020 and the completion of these new ‘megamax’ vessels would coincide with the expiry of the 2M+HMM arrangement in April of that year.”

The AEX service will initially be operated independently by HMM, although future partnerships with other carriers cannot be ruled out, including potential slot sales or swaps, Alphaliner said.

It noted that the AEX service will offer the fastest connections between Busan and Rotterdam, with an advertised transit time of 30 days, compared to 33-39 days on rival services.

“Hyundai’s ’AEX’ is the only new string to be introduced on the route so far this year, and it will add about 2% to the total Far East - North Europe capacity,” Alphaliner added. “Together with upgrades planned on existing strings, the average weekly capacity on the route will increase by 9.6% from 257,000 teu in the second quarter of 2017 to 282,000 teu in the second quarter of 2018.”

It said freight rates on the route are expected to come under pressure, as capacity utilisation levels are expected to drop in March and April.

“Latest available data from CTS shows that total Far East-North Europe volumes increased 3.9% last year, with supply growth trending higher than overall demand growth since May 2017,” Alphaliner said. “Average capacity utilisation has fallen by 3 percentage points, down from 92% in the fourth quarter of 2016 to 89% in the last quarter of 2017.”

Analysis by SeaIntel of the overall Asia-Europe trade indicates that Q4 2017 demand on Asia-Europe dropped by 10.5%, quarter on quarter, while capacity was only reduced by 4.8%, resulting in excess capacity of 1.2 million TEU, with utilisation dropping each quarter throughout 2017, reaching just 74.7% in Q4 2017, the second-lowest Q4 since 2012.